Which should you choose…Will or Trust?
By Maria Sullivan, Attorney
Every week there seems to be a new funeral notice on our local bulletin boards. How often do we say to ourselves, “Oh, they were so young”? For many, death is unexpected, and often putting one’s affairs in order is not a priority.
We all know someone who thought they put their final affairs in order, and after the funeral the family realizes those plans were not enough. The expensive Revocable or Living Trust that Uncle John purchased 10 or 20 years ago did nothing to avoid a court probate. Uncle John paid $1,000 or more for a stack of nice looking legal trust paperwork in a fancy binder or book, but we find out a costly court probate is still required. The attorneys tell Uncle John’s family they need a $2,500 deposit for legal fees, and it will take a year or more for a probate to be concluded so that Uncle John’s property can be deeded to his family. Could some of these problems be avoided?
Over the past 9 years I have reviewed a number of Revocable Trusts that were sold here on Molokai, typically among the Filipino community, and the trusts are totally ineffective. That is, the client paid a lot of money (reportedly $700 to $1,200 or more) and they basically purchased a stack of nice looking papers. These trusts were sold by paralegals, notary publics or persons who said they worked for an “Estate Planning Company.” The common factor in all of the questionable or ineffective trusts I have reviewed on Molokai is that a Hawaii State licensed attorney did not prepare the trust. In many cases the paperwork establishes a trust, but the client’s real property, such as their house, lot or rental house was not properly deeded into the trust, so the trust was “unfunded” or “empty,” and basically ineffective.
Now – while you are in good health – is a good time to consult an attorney to write a Will or set up a Revocable Trust, or have your current Will or Revocable Trust reviewed and updated if necessary.
Estate planning is the process of coordinating your assets and legal documents so that you achieve your goals as to how you property is distributed upon your death. Estate planning documents include a Will or a Revocable Trust. It is important that an attorney prepares these legal documents. For those who consider Hawaii their home or primary residence, they should be prepared by an attorney licensed to practice law in the State of Hawaii.
A Will is a document that states your directions for the distribution of your real and personal property upon your death, typically to a surviving spouse, partner, children or family member.
If a Will includes “real property” such as a house, lot or rental house, a court probate – a supervised court proceeding – is required to pass property to the beneficiaries of the Will or estate. In my experience probate takes 9 months to a year or more and costs at least $2,500 in fees and costs.
An alternative to a Will is a Revocable Trust (which is sometimes known as a Living Trust). If you own real property such as a house, lot or rental property, you should consider a Revocable Trust, which is helpful to avoid a court probate. A Revocable Trust “survives” your death and leaves a trusted person (the Trustee) in charge to manage – and ultimately distribute ¬– the estate property. The Trustee has considerable authority to manage and distribute the property out of the Trust to the trust beneficiaries, who are usually a spouse, partner, children, or family member. The Trustee may also make payments from the trust assets for the benefit of children or other persons needing financial supervision. No court probate is required if the Revocable Trust is set up properly. For an unmarried or widowed person who owns real property, the primary purpose of a Revocable Trust is to avoid probate upon their death.
Finally, if you already have a Will or Revocable Trust, it is important to have an attorney review your documents when you experience significant life changes or events such as marriage, divorce, births, deaths or adoptions to ensure that the Will or Trust still meets your needs and desires.
The information in this article is very general, and you should seek the advice of an attorney to discuss the particulars related to you and your family.
Maria Sullivan has been an attorney since 1980, and has practiced law in Hawaii since 2004. She lives and practices law on Molokai. You may contact her at 553-5181 or at firstname.lastname@example.org.